Now’s the Time to Make New Year’s Resolutions For Your Taxes

It's time to make New Year's resolutions and that goes for taxes, too

Taxes touch every part of our lives, including our work, saving for college or retirement, home buying and selling, charitable giving and paying for healthcare. Investors know that taxes have a major impact on a holding's rate of return.

So it's good to make smart tax moves and avoid dumb ones. Here are useful tax resolutions for 2025.

I WILL strive to avoid tax underpayment penalties

Higher interest rates pushed up the penalty on income-tax underpayments to a steep 8% for most of 2024, and it is still quite high at 7%. That compares with 3% a few years ago.

To avoid these charges, Americans must pay at least 90% of what they owe well before the April tax-due date. The deadline is Dec. 31 for employees and others who have taxes withheld, and it is Jan. 15, 2025, for filers paying quarterly estimated taxes.

Taxpayers can also avoid penalties by paying an amount equal to either 100% or 110% of their 2023 taxes, depending on income. For filers paying quarterly estimated taxes, the 100% or 110% thresholds apply per quarter.

Taxpayers who miss the deadlines can still make payments to stop the interest clock. (IRS.gov/ directpay is a useful option.) For more on this complex topic, see IRS Publication 505.

A final note to taxpayers living in states with federally declared disaster areas this year: The IRS has extended tax deadlines for these areas that could lower underpayment penalties.

I WON'T mistake my top income-tax rate for my effective rat